- letter of credit
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letter of credit: a document issued to a beneficiary at the request of the issuer's customer in which the issuer (as a bank) promises to honor a demand for payment by the beneficiary in order to satisfy or secure the customer's debt compare guaranty◇ A letter of credit is usu. requested by a buyer of merchandise (the issuer's customer) to be issued to the seller (the beneficiary) in order to secure the payment for the merchandise. In effect the letter of credit is considered to extend a line of credit or substitute the issuer's credit for the customer's.commercial letter of credit: a letter of credit which is used to satisfy payment for merchandise and which usu. requires the beneficiary to present a draft and some documentary proof (as of shipment or receipt of the merchandise) when making a demand for paymentirrevocable letter of credit: a letter of credit which the issuer cannot revoke or modify without the consent of the issuer's customer or the beneficiarystand·by letter of credit: a letter of credit which is used to secure payment in case of default by the issuer's customer and which requires the beneficiary to present some documentary proof of such default when making a demand for payment
Merriam-Webster’s Dictionary of Law. Merriam-Webster. 1996.
- letter of credit
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I
noun
credit account, credit note, guaranty, negotiable instrument, paper credit, security
associated concepts: financial guarantee, letter of delegation, letter of exchange, letter of introduction, letter of license, letters testamentary
II
index
draft
Burton's Legal Thesaurus. William C. Burton. 2006
- letter of credit
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n.A promise made by a bank or other financial institution to another bank or financial institution that it will honor demands for payment on behalf of a specified customer under specified conditions.
The Essential Law Dictionary. — Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy Hackney Blackwell. 2008.
- letter of credit
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A letter from a bank or other financial institution guaranteeing payment of a certain amount on behalf of a customer. The letter of credit substitutes the bank's credit for the customer's credit. Letters of credit are used primarily to facilitate international transactions.Category: Business, LLCs & Corporations → Business Accounting, Bookkeeping & FinancesCategory: Business Cash Flow Problems & BankruptcyCategory: Business, LLCs & Corporations → Business Tax & DeductionsCategory: Personal Finance & Retirement → Taxes → Tax Audits
Nolo’s Plain-English Law Dictionary. Gerald N. Hill, Kathleen Thompson Hill. 2009.
- letter of credit
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InternationalAlso known as a documentary credit.The most frequent form of payment in international trade. A letter of credit is a contract under which a bank agrees to pay the seller, in connection with the export of specific goods, against the presentation of specified documents relating to those goods. The letter of credit is issued at the request of the buyer (who is then referred to as the applicant for the credit) in favour of the seller (the beneficiary of the credit).For more on letters of credit, see Practice note, Letters of credit: overview (www.practicallaw.com/1-107-3740).+ letter of creditUSAA three-party instrument or document issued by a bank that guarantees the payment of a customer's draft up to a stated amount for an express period of time. The purpose is to substitute the issuing bank's credit for that of the applicant and eliminate the risk to the beneficiary that the applicant will not pay. Letters of credit are irrevocable unless expressly stated otherwise. They are used in many circumstances and are prevalent in international trade.There are several different types of letters of credit including:• Commercial − used as a primary means of making payments (such as paying for goods shipped from overseas).• Standby − used as a secondary source of payment (in lieu of a guaranty) or as a direct payment on a debt issue (such as monthly interest payments on municipal bonds).• Performance − issued to guarantee performance under a contract.• Confirmed − provided by a correspondent bank and guaranteed by the issuing bank.For the purpose of the UCC a letter of credit is a definite undertaking that satisfies the requirements of Section 5-104 of the UCC by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value (UCC §5-102(a)(10)). A letter of credit is an asset type over which an entity can grant a security interest under Article 9 of the UCC.Glossary
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.
- letter of credit
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n. A financial instrument, typically issued by a bank, in which the issuing institution commits to pay a draft presented by a third party in a specified format or meeting certain criteria.
Webster's New World Law Dictionary. Susan Ellis Wild. 2000.
- letter of credit
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A written instrument from a bank or merchant in one location that requests that anyone or a specifically named party advance money or items on credit to the party holding or named in the document.
Dictionary from West's Encyclopedia of American Law. 2005.
- letter of credit
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A written instrument from a bank or merchant in one location that requests that anyone or a specifically named party advance money or items on credit to the party holding or named in the document.
Short Dictionary of (mostly American) Legal Terms and Abbreviations.
- letter of credit
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n.a document issued by a bank guaranteeing to provide a customer a line of credit (automatic loan up to a certain amount) for money or security for a loan. Such a letter is used primarily to facilitate long-distance business transactions.
Law dictionary. EdwART. 2013.
